Do You Have to Pay Back Medicaid in Illinois?

Yes, in many cases you do have to pay back Medicaid in Illinois, but the repayment comes from the deceased recipient’s estate rather than from relatives personally, and several rules can shrink or block the claim entirely. The state pursues recovery for benefits paid on behalf of anyone who was 55 or older, and for all medical costs paid on behalf of someone who was permanently living in a nursing facility at any age.¹ A $25,000 estate floor, protections for surviving spouses and certain children, and a hardship waiver all sit between the state and the money.²

When the State Can Come After the Estate

Illinois pursues estate recovery in two situations. First, the state recovers medical assistance paid on behalf of anyone who was 55 or older when they received benefits. Second, if a recipient of any age was permanently institutionalized in a nursing facility and the state placed a lien on their real property, Illinois can recover all medical assistance paid during their lifetime, not just costs from age 55 forward.³

A detail that surprises many families: Illinois can also file a claim against the estate of the recipient’s spouse, regardless of which spouse died first.¹ If a Medicaid recipient dies and their spouse inherits everything, the state does not walk away. It waits, and when the surviving spouse eventually dies, it files against that estate for the original recipient’s Medicaid costs.

What the State Can Recover

Federal law requires every state to seek repayment for nursing facility care, home and community-based services, and related hospital and prescription drug costs for recipients who were 55 or older.⁴ Illinois follows that mandate and also recovers cash assistance payments made under its Aid to the Aged, Blind, and Disabled program, at any age.⁵

One important carve-out. Medicare cost-sharing expenses paid on behalf of Medicare Savings Program enrollees, such as premiums, deductibles, and copays, are exempt from estate recovery for any payments made after January 1, 2010.⁵ If your loved one was enrolled in the Qualified Medicare Beneficiary or Specified Low-Income Medicare Beneficiary program, the state cannot seek repayment for those costs.⁶

What Counts as the Estate

For most recipients, Illinois defines “estate” as real and personal property that passes through probate. That typically includes a home owned solely in the deceased person’s name, bank accounts without a payable-on-death designation, vehicles, and other individually titled property. Assets that skip probate stay outside the state’s reach in most cases: life insurance proceeds with a named beneficiary, retirement accounts like IRAs, joint accounts with rights of survivorship, and accounts with transfer-on-death designations.⁷

There is one significant exception. If the deceased received benefits under a long-term care insurance policy and had assets disregarded because of that policy during their Medicaid eligibility determination, the definition of estate expands. It then includes property held in joint tenancy, tenancy in common, life estates, living trusts, and other arrangements that would otherwise bypass probate.⁵ The expanded definition is narrow in practice, but where it applies, the usual strategies for keeping assets out of probate will not shield them.

The $25,000 Small Estate Floor

For Medicaid recipients who died on or after July 1, 2022, Illinois will not pursue recovery against the first $25,000 of estate value. If the whole estate is worth $25,000 or less, the state leaves it alone.² For estates worth more, the claim reaches only the value above that floor. A home that pushes the estate above $25,000 still puts the excess at risk.

Family Members Who Block Recovery

Regardless of estate size, Illinois cannot enforce a recovery claim while any of the following survive the recipient:

A surviving spouse. No recovery until after the spouse dies.
A child under 21. Recovery is blocked as long as the child is alive and under 21.
A blind or permanently disabled child of any age. The child must meet Social Security’s definition of permanent and total disability.²

These are statutory bars, not discretionary waivers. The state cannot pursue the claim while a qualifying relative is alive. The protection is automatic, though families may need to inform the state of the surviving relative during probate.¹

Caregiver Child Exemption

An adult child who lived in a parent’s home for at least two years immediately before the parent entered a nursing facility can qualify to keep the home out of the recovery claim. The child must show that their caregiving directly delayed the parent’s need for institutional care. Families typically prove this with medical records, physician statements, tax returns showing the same address, and utility bills establishing residency during the qualifying period.⁸ The documentation burden is high. Vague claims of helping out will not satisfy the requirement.

Sibling Equity Interest Exemption

A sibling of the deceased who holds an equity interest in the home and lived there for at least one year before the recipient entered a nursing facility may also qualify. This protects situations where siblings jointly own and share a home, and prevents a forced sale that would displace the surviving sibling.

Hardship Waiver

When none of the automatic exemptions apply, heirs can ask the state to reduce or eliminate its claim by filing a hardship waiver. The Department of Healthcare and Family Services will waive its claim, in whole or in part, when recovery would cause undue hardship for a beneficiary or heir.⁹

The timeline is strict. The completed application and supporting documents must be submitted within 60 calendar days of the date on the state’s Notice of Intent to File a Claim. Each heir seeking hardship consideration must file separately. The application asks for the estate’s total value and the heir’s income. Useful supporting evidence includes documentation of the heir’s finances, medical expenses, or other circumstances showing that paying the claim would create genuine hardship. Applications can be submitted electronically through the HFS Information Portal or mailed to the Bureau of Collections in Springfield.⁹ Forms are available in English, Spanish, Polish, Chinese, Tagalog, and Arabic on the HFS website.¹⁰

Liens Placed During a Recipient’s Lifetime

Illinois can place a lien on a Medicaid recipient’s real property while they are still alive if the state determines they are permanently institutionalized, meaning they are not reasonably expected to return home.⁴ The lien prevents the property from being sold or transferred until the Medicaid debt is addressed. The recipient must receive notice and an opportunity to challenge the “permanently institutionalized” finding, and the state must remove the lien if the person is discharged and actually returns home.¹¹

The state cannot place a lien while certain relatives live in the home: a spouse, a child under 21, a blind or disabled child of any age, or a sibling who has an equity interest in the property.⁴ If none of those relatives live there, the home can be subject to a lien even before the recipient dies.

Giving Away Assets Before Applying: The Five-Year Look-Back

Families sometimes try to protect assets by transferring them before a loved one applies for Medicaid long-term care coverage. Illinois reviews all asset transfers made within five years before a Medicaid application to determine whether anything was given away or sold for less than fair market value.¹² If the state finds such a transfer, it imposes a penalty period during which the applicant is ineligible for Medicaid-covered long-term care.

The penalty period starts on the date of the transfer or the date the person enters a nursing facility and is otherwise eligible for Medicaid, whichever is later.¹² Its length is calculated by dividing the total value transferred by the private-pay rate at the nursing facility where the person lives.¹³ Because private-pay rates vary by facility, there is no single statewide number.

The only way to eliminate a penalty is to have all of the transferred assets returned.¹² Returning only part of them reduces the penalty but does not remove it. A well-intentioned gifting plan made without legal advice can backfire badly here. A family that transferred a $300,000 home three years before a Medicaid application faces a penalty of roughly four to five years at typical private-pay rates, during which the applicant gets no Medicaid help paying for nursing home care.

Appealing a Lien or Claim

If you disagree with the state’s decision to file a lien or estate claim, you can request a hearing. You can write a letter requesting a hearing or fill out an Appeal Request form, available at local Department of Human Services offices. Appeals go to the Bureau of Administrative Hearings at 69 W. Washington, 4th Floor, Chicago, IL 60602, by email to DHS.BAH@illinois.gov, by fax at 312-793-3387, or by phone at 1-800-435-0774 on weekdays between 8:30 a.m. and 4:45 p.m. For lien and estate questions specifically, Cook County cases should contact HFS.BOC.TRS.CHI.LE@illinois.gov, and all other jurisdictions should contact HFS.BOC.TRS.SPR.LE@illinois.gov.³

1
Illinois General Assembly. 305 ILCS 5/5-13
2
Illinois Department of Healthcare and Family Services. Guide to the Medicaid Estate Recovery Program
3
Illinois Department of Healthcare and Family Services. Estate Recovery
4
Medicaid.gov. Estate Recovery
5
Illinois General Assembly. Illinois Administrative Code Title 89 Part 102 – Section 102.210
6
Illinois Department of Healthcare and Family Services. Medicare Savings for Qualified Beneficiaries
7
Illinois Department of Healthcare and Family Services. FAQs
8
Illinois State Bar Association. Summary of DRA Changes That Will Affect Your Clients and How You Process Their Medicaid Applications
9
Illinois Department of Healthcare and Family Services. Hardship Waiver
10
Illinois Department of Healthcare and Family Services. Online Forms
11
U.S. Department of Health and Human Services, ASPE. Medicaid Liens
12
Illinois Department of Healthcare and Family Services. Highlights of New Eligibility Requirements for Long Term Care
13
Illinois Department of Human Services. Penalty Period Due to Non-Allowable Transfers